Boeing to cut 30% of defense executives

Aerospace company to close Calif. facilities, consolidate units. Chicago shouldn't feel much

November 07, 2012|By Greg Karp | Tribune staff reporter

Boeing headquarters in Chicago. (Reuters)

Chicago-based Boeing Co. on Wednesday announced a major restructuring of its defense division that will cut 30 percent of executives from 2010 levels and calls for future cuts to middle-manager ranks.

The job cuts are "extremely unlikely" to affect executives at Boeing's headquarters in downtown Chicago because they are coming from firm's defense division, not corporate operations, Boeing spokesman Todd Blecher said.

Despite the timing, Wednesday's announcement had nothing to do with the U.S. presidential election, Blecher said.

"I know what it looks like, but I can tell you from having been involved in this that I never heard anybody deliberately plan around the election," he said.

The company has been working for months on the restructuring, and it was happenstance that the senior executive committee met on Monday to give final approval for the plan, which was announced Wednesday, he said.

The restructuring is also not directly tied to the impending Jan. 2 "fiscal cliff," which in part refers to huge automatic cuts in U.S. defense spending, he said.

Instead, Boeing, the Pentagon's second-largest supplier, said the changes were the latest step in a budget-cutting drive that has already identified cost cuts totaling $2.2 billion between 2010 and today. The firm would only give the percentage of executives cut, not raw numbers of people or positions being eliminated.

"There's an overall effort to reduce executive ranks across the board -- we're getting to the end of the first phase of that," Blecher said. "Since 2010, we've really been on a push to reduce our operating costs within the defense business. It was in anticipation of declining defense budgets over a longer period of time than the current political situation would have you believe."

The company is also restructuring its defense businesses, which required moving around some executives, and it is re-examining its facilities nationwide, which will result in some consolidation, Blecher said.

The measures come as U.S. weapons makers are under pressure to cut costs and preserve profit margins amid dwindling defense spending in the U.S. The next phase of cost-cutting, another $1.5 to $2 billion through 2015, will involve cuts to personnel below executives, to middle-mangers, Blecher said.

Boeing and other top weapons makers like Lockheed Martin, Northrop Grumman Corp. and Raytheon Co. have focused heavily on cutting costs and drumming up foreign sales to maintain profits as they prepare for a sustained period of weaker defense budgets.

Defense consultant Loren Thompson said the changes were needed to ensure Boeing's continued profitability. "Many investors focus on Boeing's commercial operations," Thompson said, referring to the jet-making business. "But defense provides 40 percent of the company's revenues and returns, so controlling costs there is crucial to maintaining the company's overall profitability."